March 22, 2011
You know that the volatility of an investment matters as much as its overall return. But you may not know that research into this fundamental investment principle has been applied in many other disciplines to explain phenomena as unexpected as waiting times in lines at Disney World.
Kaiser Fung’s new book Numbers Rule Your World uses nontechnical language to dissect many of the statistical challenges professionals and laypeople have confronted in recent decades. Fung’s approach renders the book’s concepts and anecdotes accessible, and provides a fun and informative read for professionals curious about the many hats statistics wears in today’s society. From the successes of queuing theory at Disney World to the misapplication of lie detector tests in law enforcement and the military, Fung shows how statistical thinking has shaped our world.
Taken as a whole, the book offers an overview of applied statistics and teaches a valuable set of lessons about how to think statistically. Fung provides a great sampling of everyday accomplishments that make use of statistical thinking.
Each of Fung’s five chapters describes two everyday situations where statistics clarify human misunderstanding in order to explain a fundamental point. Fung draws useful comparisons between the scenarios he discusses to help lead to each conclusion. In this way, Numbers Rule Your World is really a collection of short essays, and I recommend reading and digesting each chapter individually.
Here is a short recap of each chapter (highlighting its fundamental point):
Chapter 1: Fast Passes / Slow Merges
Lesson: “Always ask about the variability.”
Fung’s emphasis in this chapter is on the value of examining variability rather than commonly used averages. User satisfaction is the goal and users like control, Fung argues. Control sometimes can be won by managing variability. Even though average outcomes may worsen, that benefit of reduced variability means variance is usually a more important consideration than the average result.
The two queue-management examples he uses are not well related to this main point, although they are interesting case studies.
First, Fung discusses the implementation of on-ramp traffic lights in the 1970s to reduce highway congestion in the area around Minnesota’s Twin Cities. He compares this innovation with the introduction of the “FastPass” at Disney World to allow park-goers to use their time more efficiently. FastPass is a new system whereby park-goers can reserve places in an electronic queue rather than standing in a physical line.
Although Fung seems to be setting up a dichotomy between controlling variability and optimizing average values, this problem never arises in his highway example, where controlling traffic variability decreases accidents and actually lowers commute times. While customers at Disney World face longer wait times with FastPass than if they stood in line waiting, they are free to explore the park in the meantime, leading to much higher satisfaction. In this case, time control emerges as the true king of customer satisfaction.
In neither case does the average time ever emerge as a serious problem that must be reconciled with variability, so Fung’s lengthy discussion of this imaginary opposition and claims like “variable traffic conditions mess up our well-laid schedules, and that ought to upset us more than the average journey time” detract from the overall discussion. The true value of this chapter lies in its discussion of the success and failure of different attempts to control variability.
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